The Economy

[okalb 104]

I rarely post in SC but I have to break my own rules to ask this question.

I am trying to understand something. For the last few years many people on the left have been saying that the economy was falling apart. A house of cards ready to come crashing down. People on the right have insisted that the economy was very strong and growing even stronger. The right insisted that tax cuts were working and doing their job. The left claimed the opposite. So how do the people that have been defending the right's economic policies all along explain the current state of the economy. It is pretty clear that things are bad and getting worse every day. Did we not cut taxes enough? Was it the left preventing the right from doing what needed to be done. Clearly what was done didn't work and plenty on the left have spent the last few years predicting the current mess.

Time flies like an arrow....fruit flies like a banana

[rushmc 23]

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I rarely post in SC but I have to break my own rules to ask this question.

I am trying to understand something. For the last few years many people on the left have been saying that the economy was falling apart. A house of cards ready to come crashing down. People on the right have insisted that the economy was very strong and growing even stronger. The right insisted that tax cuts were working and doing their job. The left claimed the opposite. So how do the people that have been defending the right's economic policies all along explain the current state of the economy. It is pretty clear that things are bad and getting worse every day. Did we not cut taxes enough? Was it the left preventing the right from doing what needed to be done. Clearly what was done didn't work and plenty on the left have spent the last few years predicting the current mess.

Adjusting your question a bit.
What do you think the effect of energy prices have on the economy?

What do you think is driving energy prices?

Edited to add:

I do not see what you see "clearly".

And, some have been working hard to make predictions come true.

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[lawrocket 3]

What we are experiencing is a necessary market orretion for unprecedented eonomi growth over the last roughly 25 years. There were some hiccups, but the growth continued.

We saw the dot.com industry tank in much the same way as this housing market has. Perceived wealth was lost.

The S&L crisis? Hello!!!!

What we see is a market correction. I think that if there is any one thing to point to for THIS particular eonomic period, it's the fallout from Gramm-Leach-Bliley.

Also, most want to blame the POTUS when it is bad and redit him when it was good - unless the POTUS is from a different political party. When the economy was humming through 2006, it was maximized by GOP and minimized by Dems. Bush had nothing to do with it. Now it is expeedient.

I see the quasi-recession in 2000-2001 to be worse than this quasi-recession. We'll bounce back and another bubble will develop and burst in the next decade.

My wife is hotter than your wife.

[billvon 3,116]

>So how do the people that have been defending the right's
>economic policies all along explain the current state of the economy.

IMO the two aren't related very closely. The economy does its own thing, and economic policies (tax rates, interest rate adjustments etc) have a marginal effect at best. Indeed, if you look at history, our economy has done pretty well during times of high taxation. Does that mean that high taxes make an economy do well? Not at all; the two aren't all that related.

Nowadays we have a lot of "knobs" we can use to fiddle with the economy. Stimulus checks, jobs packages, interest rate adjustments, S+L bailouts, tax rates, corporate taxes etc. People really get into fiddling with them all, and the economy changes so much that anyone can twiddle a knob at random, watch the result and say "SEE? SEE? The economy got BETTER! Cutting taxes really does solve all our problems!"

But in reality they're just twiddling knobs while the economy does its own thing.

[StreetScooby 5]

What you're reading about, and our country will continue to feel for some time, is a crisis in confidence. For many years, if our system produced a piece of white paper (e.g. bonds), it was considered good. No longer. Even though the vast majority of bonds are still performing, no one can tell the good ones from the bad ones. To boot, the institutions that really did produce good paper (e.g., FNMA) are being turned into political spigots, and the world is reacting to that, badly (...as they should).

We are all engines of karma

[kelpdiver 2]

The economy cannot be explained by one or two factors. Imagine you're on a boat in the middle of the Pacific. You feel the effects of storms from thousands of miles away in every direction.

But....
I think the President's deficit spending, coupled with the lowering of interest rates badly devalued the dollar, which caused a good chunk of the increase in the price of oil, which then snowballs into the limited spending people can do. All that money flows out of the country.

The extremely low interest rates post 9/11, coupled with the change in capital gains taxation on house sales put in effect in the late 90s, along with the long standing mortage interest deduction fueled the housing bubble. The US wasn't nearly as bad as Tokyo, but it was still unsustainable.

The negative savings rate if real (I cannot determine if this metric ignores the rise of the 401k) meant that people would be unable to ride out a short term cash flow problem.

At the financial institution level, overleveraging and pursuing higher risk to make up for lower rates lead to spectacular failures, and liquidity sucks as a consequence. So it's hard to get capital to expand, and people are afraid to.

----
Right or wrong, the GOP will be punished in the elections. If true, Obama will not likely be able to jack up taxes until the economy settles, but he can attempt to cut spending (Iraq).

And is there anything sadder than Alan Greenspan running around trying to protect his legacy?

[kallend 2,148]

www.dropzone.com/cgi-bin/forum/gforum.cgi?post=2900411#2900411

What do YOU think is driving the weak $US?

...

The only sure way to survive a canopy collision is not to have one.

[rushmc 23]

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www.dropzone.com/cgi-bin/forum/gforum.cgi?post=2900411#2900411

What do YOU think is driving the weak $US?

I suspect, to answer your question, the same (or nearly so) as you.

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[lawrocket 3]

Plenty of factors, including an insane deficit.

But the weakened dollar doesn't explain the worldwide economic issues, right? So there is more at work.

My wife is hotter than your wife.

[kallend 2,148]

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Plenty of factors, including an insane deficit.

But the weakened dollar doesn't explain the worldwide economic issues, right? So there is more at work.

Right. We've offloaded most our manufacturing to Asia (China) and now get surprised when they (gasp) use OIL! The nerve of those Chinese! They should be spinning gold out of straw for our benefit.

...

The only sure way to survive a canopy collision is not to have one.

[TrophyHusband 0]

the left has been claiming for years that the economy is bad because there was a republican president and up until two years ago a republican congress. they weren't making a prediction, they were actually saying it was bad when in fact it was good. the economy has its ups and downs, so eventually you will be able to say "see, i told you it was bad". also, the economy isn't about how much money there is, but how much money is moving around.

right now there are a couple of big things going on. in the last few years, lending institutions have been loaning money to just about everyone who walked throught the door. that meant that tons of people bought homes that never could afford them before. this employed a lot of people and put a lot of money into the pockets of all the construction trades and all of the businesses that supplied construction materials. builders were making a lot of money, and people were flipping houses and making money. eventually people couldn't pay their mortgages and houses started to forclose, banks stopped lending to people who couldn't afford it, and there was probably some market saturation as well. the bubble burst and now we are dealing with the aftermath. all of that money that was moving around is no longer moving around.

the other thing we have is escalating gas prices. you are paying for this twice. first is when you fill your tank, but you pay again when you go to the store to buy anything, especially groceries. this means you and everyone else has fewer dollars to spend on other thing, so instead of moving around, a larger chunk of your money is going to the oil companies.

while things aren't exactly great right now, they aren't as bad as many people think they are. we aren't even in a recession yet. we may or may not go into a recession, only time will tell.

"Your scrotum is quite nice" - Skymama
www.kjandmegan.com

[happythoughts 0]

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all of that money that was moving around is no longer moving around.

Market Economy.

The idea is that the money is turned over. Each time it is spent, it creates jobs.

I saw this scenario happen when GTE had multiple floors on multiple office buildings all over the county. When centralized and moved 2,000 jobs into new office space, two bar/lunch spots closed in the downtown area.

There was no longer money being spent and the economy in the area declined.

Then, they outsourced the jobs from the centralized location. Once again, two restaurants and a couple of other businesses went from thriving to closed in less than a year.

Now this is happening on a national scale.
It doesn't matter which party is in office.

[StreetScooby 5]

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But the weakened dollar doesn't explain the worldwide economic issues, right? So there is more at work.

Actually, a lot of what you're seeing right now is the result of Bernanke printing tons of green paper. He's still doing it.

We are all engines of karma

[StreetScooby 5]

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The idea is that the money is turned over.

Green paper has no value, otherwise, in current economic thinking. That's my understanding.

We are all engines of karma

[kelpdiver 2]

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the left has been claiming for years that the economy is bad because there was a republican president and up until two years ago a republican congress. they weren't making a prediction, they were actually saying it was bad when in fact it was good. the economy has its ups and downs, so eventually you will be able to say "see, i told you it was bad". also, the economy isn't about how much money there is, but how much money is moving around.

right now there are a couple of big things going on. in the last few years, lending institutions have been loaning money to just about everyone who walked throught the door. that meant that tons of people bought homes that never could afford them before. this employed a lot of people and put a lot of money into the pockets of all the construction trades and all of the businesses that supplied construction materials. builders were making a lot of money, and people were flipping houses and making money. eventually people couldn't pay their mortgages and houses started to forclose,

So was the economy really "good" like you claim, or was it just on borrowed money?